A few weeks ago, Elite Daily published an article titled, “If You Have Savings In Your 20s, You’re Doing Something Wrong.” The overall idea behind this article was that if you have any saving while in your 20s then you're missing out on your youth and wasting your life. Well, Elite Daily… you’re wrong. You’re so, so wrong. There were thankfully many arguing comments and counter-articles calling this article out on its foolishness, but let's just take a look at how the numbers ultimately would play out if you were to follow this article's advice.
In the article, the author says that 20-somethings shouldn’t have the same financial pressures and stresses as a 40-year-old woman with four kids and a second mortgage. Let’s look at the retirement plan of this hypothetical 40-year-old woman. Let’s say she needs to save $500K to retire.
- If she started saving at 25, she’d only need to save $251/month for the next 40 years to get there. While we’re sure there are plenty of other things she’d prefer to spend that money on, it’s also not an unreasonable amount to save on a monthly basis. If her company offers a 401k matching program, then she could put aside even less!
- Now let's say that she waits ten years and starts saving at 35. Suddenly that number jumps to $500. Now that’s a little more painful as she juggles a mortgage and a few toddlers who constantly outgrow their clothes.
- If she waits to start saving for retirement until 45 when she has four teens and apparently two mortgages, she then needs to save $1,100 per month. Ouch. Putting aside $13,200 every year for many people would put a squeeze on them financially, let alone adding it to the financial obligations the author also outlined.
Now, this is obviously using plenty of assumptions, but the point of this illustration is to show how much easier it is to achieve financial goals by starting early. I’d be willing to make a bet that at 45, regardless of your situation, it’d easier to continue saving $250 a month then starting anew and having to come up with $1,100 each month!
We've sat down with people in all of life's many stages, and the vast majority find it hard to set aside enough for retirement. Almost everyone has things they’d prefer to spend their money on rather than their retirement savings. While this article claims that you’re doing something wrong by saving in your 20s, I’d love to ask the author, “At what point do you think it becomes easy to save?” Plenty of people in their 30s would rather go out on the town than sock away a few extra bucks in a savings account. People in their 40s might prefer to spend their cash on a nice vacation. Folks in their 50s are probably ready to celebrate having their kids out of the house! The list goes on. At no point in life, do people suddenly think, “Oh gosh, I’ve got so much cash that I’d just love to not spend.”
Whether you’re in your 20s, 40s or 60s, this concept is exactly the same. Sure, there are different responsibilities that you face at different stages of life, but the ones you face later in life will be much easier to handle if you’ve taken care of the responsibilities you’re faced with early in life… such as saving.
We understand that it’s impossible save every penny you earn, but there should be a balance in your life between saving and spending. When you start saving early, even if it’s just a little bit, and find that balance in your life, you’ll ultimately be less financial stressed and more at peace with your financial situation.